Health Reform Gutted After Supremes Reject Mandate

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JUNE 27, 2013 - It's a balmy Thursday , the last day the Supreme Court is sitting before ending its 2012-13 term, and besides the usual cats and dogs, there's one big case left.Cuccinelli v. Sebelius, the long-gone attorney general of Virginia vs. the long-gone secretary of Health and Human Services, tests whether it's constitutional to require Americans to buy health insurance.

This is a big deal. The most important changes in the health reform law that passed in 2010 -- the Expedia-like health exchanges where people can compare and buy health insurance, the subsidies to help people afford coverage, the mandate that's about to be declared constitutional or not -- all go into effect in less than six months, on Jan. 1, 2014. Without the mandate to bring millions of mostly younger, healthier Americans into the health insurance pool, insurance companies won't be able to end their most noxious practices -- denying coverage to people with previous conditions, for example -- without sharply raising premiums for everyone. Health reform would go from unpopular to radioactive.

It's all over in minutes. With Anthony Kennedy providing the swing vote, the court rules 5-4 that the federal government cannot require citizens to buy something against their will. Kennedy echoes some of the more extreme arguments of those who challenged the law. Under this theory, Kennedy says from the bench, reading from his concurring opinion, Congress could require Americans to buy vegetables. And eat them. DATELINE: December 24, 2010.

OK, this might happen, or not. No one has a clue. But since a federal judge in Virginia ruled Dec. 13 that the insurance mandate is, in fact, unconstitutional, health reform advocates have at least had to think about the unthinkable. Never mind that two other federal judges had already upheld the mandate, or that opponents are now batting only 1 for 3 (five more challenges were dismissed on procedural grounds). Or that there are numerous other lawsuits working their way through other courts, and that it's way too early for any decision to be definitive, or mean much of anything. Or that court-watchers expected this conservative judge to rule as he did, and some scholars to think his reasoning was, well, goofy.

What's happening is that a legal challenge originally dismissed by most reform backers as frivolous suddenly seems much less so, and the architects of reform are having to contemplate reform without the essential linchpin that would make it work. In other words, the death of reform.

If that's so, maybe those architects should start readying Plan B, and lucky for them, there are plenty of ideas for one. Let's stipulate that making the insurance pool bigger is essential to making reform work and -- reformers hope -- lowering costs for everyone. How do you get people to buy insurance?

The way the law works now, people who refuse to buy health insurance have to pay a tax penalty. Frankly, it's so toothless in the early years that you have to wonder why A) it would work and B) why opponents are so worked up. In 2014, the penalty is $95. An annual insurance policy for an individual averages roughly $3,600. Eventually, the penalty rises to 2.5 percent of taxable income. Let's say you have taxable income of $100,000. If you wanted to roll the dice, your $2,500 penalty would still be substantially less than the cost of insurance. Of course, you'd be paying $2,500 for nothing.

There are other ways to get at this, though. For instance, Princeton professor Paul Starr suggests a policy that would allow anyone to opt out of mandatory health insurance -- as long as they signed a waiver forfeiting all rights to government subsidies or guaranteed coverage for five years. If they got sick, Starr says, they'd simply be back in the world we're living in now. No insurance company would have to cover them, and even if they could get insurance, the price would be high to account for their pre-existing condition. And there'd be no government subsidy to help them afford coverage. "While that’s hardly a desirable position to be in, they would have made the decision themselves, and the option to step outside the system would relieve Republican concerns about government mandates," Starr wrote in The New York Times.

A second alternative to the mandate is almost as libertarian. Don't want to have to buy coverage? Fine. But if the day comes when you get sick and suddenly you change your mind, you can still get insurance on demand at the same rate everyone else pays. Except you'll have to pay an entire year's worth of premiums to get it, in addition to paying the regular premium going forward. That would preserve the right to guaranteed coverage, but penalize people for waiting until they got sick to join the system.

The third way to handle this is one that the federal government already uses to encourage people to sign up for Medicare doctor coverage (Part B) and the Medicare drug plan (Part D). Both are voluntary, but about 90 percent of eligible seniors sign up. Those who opt out can opt back in, but they have to pay a 10 percent penalty for every year they skip.

The war against the individual mandate is a conservative campaign, which is richly ironic. Many conservatives used to support requiring everyone to have health coverage as a matter of personal responsibility – why should the rest of us pay when some free-rider without coverage gets sick and goes to the emergency room? Or a free rider who waits to get sick and then demands coverage under a law requiring insurance companies to cover everyone (as the new reform law does). That was then, though. Now the mandate is an outrageous intrusion on personal liberty to conservatives. Too bad today's angry conservatives can't get in touch with their earlier selves, who believed that personal responsibility was at least as important as the freedom to roll the dice and count on others to bail them out.